Shell earnings: What to expect

SarahKent

LONDON--Royal Dutch Shell PLC
RDSA
is set to announce its fourth-quarter earnings on Thursday before the market opens in London. Here's what you need to know:

EARNINGS FORECAST: A roundup of nine analysts by FactSet forecasts adjusted earnings, which strips out one-off items, of $2.2 billion for the fourth quarter, up around 20% from a year earlier.

WHAT TO WATCH:

--CASH IS KING: Oil prices have recovered substantially since hitting their nadir around this time last year, but investors will be looking for evidence that Shell's efforts to get its finances are working and its ability to cover costs from free cash flow is improving.

--TAPPED OUT: Shell's debt ballooned in the wake of its roughly $50 billion acquisition of BG Group last year. It promised to bring its lending under control, helped by a $30 billion divestment plan. With sales announced now totaling $11 billion following a major North Sea deal this week, the company should be able to update with progress on its plans to reduce debt.

--STAYING THRIFTY: Oil prices may be higher, but big oil companies like Shell are expected to keep a tight lid on spending while they continue to get their balance sheets to a point where they can cover dividends and spending with cash.

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